TET 407: ENERGY PLANNING,

POLICY AND TRADING

By:-
Dr. Francis Njoka
Course content
Elements of planning: Planning period, planning errors, data and dealing with uncertainties.
Tariffs and pricing. Energy investment planning. Systems Analysis: Econometric models; the
optimization approach; graphical; analytical methods; simulation models; inquiry
methods. Evaluation and Assessment of Planning Methods; Energy conversion and the
environment: Externalities; benefit-cost analysis; environmental standards; environmental
costs. Economic and cost analysis; Energy investment decision making. Rural Energy
Supply planning: Demand estimation, load curves and load factors; grid extension,
isolated power sources; ownership, management, standards and marketing; technical
evaluation and developmental impact. The financier’s perspective, basic types of
financing, types of financing models, existing policies and regulations, designs aspects for
private-public partnership and potential donors and funds.
Objectives
The objective of this course is to equip a student with;
The skills required for economic planning and optimal management of energy
utility systems.
The knowledge on financing options for renewable energy and energy efficiency

Expected Outcomes
At the end of the course a student is expected to
 Know the key and unique elements in power utilities planning and operation
 Be able to apply standard models for supply and demand planning and
assessment of options
 Know and be able to apply tools for economic analysis of investment options in
the power sector.
 Know and be able to apply tools for analysis of cost, tariffs and pricing,
and impacts on development.
 Know the Financing options for renewable energy.
Assessment
Ordinary Examination at end of Semester: 70% Continuous Assessment: 30%
where 20% shall be continuous assessment tests and 10% shall be assignments.

Textbooks and References

Energy For Sustainability: Technology, Planning, Policy, John Randolph,
Publisher: Island Press (July 2008) ISBN-10: 1597261041

Class Attendance
Mandatory not Optional
Training on Climate Change and Energy Transition

25th to 29th September

TotalEnergies Professors Association

Energy Planning - Introduction
 Energy planning is the key to effective implementation of the energy policy.
 A nice energy plan can improve the economic, environmental and social impact of
nearly all decisions on energy use, generation, distribution or importation by a nation
or a community.
 Energy is linked to various sectors of the economy: agricultural, industrial,
commercial and domestic.
 There is need to make the current energy use and production environmentally benign.
 At the same time, these should be able to meet everybody's energy needs in a
sustainable manner.
 Modern technologies use energy efficiently, and use the world's renewable energy
resources without harming the environment.
 Sustainable energy planning can help us optimise the use of the existing capacities as
well as the development and use of energy efficient systems and appliances, and
importantly, an efficient energy management system.
What is Energy Planning?
 Energy planning is the process of envisioning a desired future state of sustainable
energy supply and consumption based on existing concerns and realities, and designing
the appropriate measures to implement that energy future.
 It offers a number of opportunities and tools for nations and communities to deal with
energy issues related to development.
 Energy planning is not a one-time exercise, but a continuous, iterative process in which the
results are continuously reviewed and new information leads to new analyses.
 Energy planning is extremely relevant for developing countries as it can be used to
overcome the limitations that inhibit sustainable energy strategies.
 These limitations may arise from the limited trained human and financial, and in some
cases, natural resources available to developing countries for addressing energy problems;
o The complex relationship between the need to provide better energy services and the need to limit
total energy consumption; and
o The lack of technological know-how for mitigating environmental problems associated with
energy production and use.
Energy planning helps in creating a picture of the current energy situation and
estimated future changes based on;
 Expected or likely plans and patterns of population growth,
 Resource availability,
 Industrialisation,
 Agricultural energy requirements, etc.

It has to be designed to make sure that;

 It furthers the interest of society as a whole
 Is used to meet social goals such as improving the quality of life,
 Engenders environmental goals such as climate protection and sustainability goals.

The current approaches to energy planning aim at providing energy services to the
society at lowest cost and with the least negative social and environmental
impacts.
Current energy planning paradigm employs a systematic analysis of all possible
strategies to meet the energy needs. It takes into account all future scenarios.

Alternative scenarios are also developed with assumptions such as:

 Transformation (e.g., through introduction of energy efficient devices such as
energy efficient stoves, improved furnaces, boilers, pumps, motors, dryers,
compact florescent lamps, light emitting diodes, etc.);
 Use of advanced control systems and features;
 Increase in energy intensity (such as rapid industrialisation with an energy
demand increase of, say, 20%);
 Increase in energy demand in domestic, industrial, agricultural and commercial
sectors;
 Expansion of renewable energy technologies (solar, hydro, bioenergy etc.) and
agro forestry (conversion of' wastelands with locally accepted species).
 Energy is linked with almost all economic sectors such as agriculture, industry, commerce,
trade, transport, telecommunications:, etc.
 It requires the cooperation between various agencies from these sectors for the planning to be
effective.
 Energy planning can be carried out at the macro-level (or national) as well as at the regional
or local levels (e.g., county, city, district, town, block or village levels).
 Macro-level planning covers longer time spans and considers more sectors and processes.
 However, centralised macro-level energy planning exercises do not account for variations in
socio-economic and ecological factors of a region which influence the success of any
intervention.
 Decentralised energy planning based on the assessment of local or regional needs and
available resources can lead to more efficient utilisation of resources.
 Area based decentralised energy plans should be incorporated into the centralised energy
plan.
 Energy planning may also be carried out as a project, which focuses on one or more specific
aspects, e.g., reducing the energy costs of a business, increasing the efficiency of energy use
in a municipality or introducing renewable energy options for meeting the heating/cooling
needs of a building.
Aims and Benefits of Energy Planning
Broad aims of macro-level energy planning:
 To provide the basis for the policy framework and to assist state agencies and other
energy-related organisations in setting the energy goals and making energy decisions that
will contribute to a growing economy in a sustainable and environmentally sound manner.
 To help in finding and allocating the resources (funds, technologies, skilled workforce,
etc.) for meeting the specific energy requirements demand of all sectors in an optimal
manner.
 To increase the use of design philosophies and features that improve energy performance,
and enhance the quality of life.
 To develop compact and complete resource use patterns so as to increase the availability
of alternatives.
 To promote the development and use of new, high efficiency, and cleaner supply
options.
 To promote the use of energy-efficient technologies or service options in infrastructure
and to increase the production of energy from local or regional distributed facilities.
Specific goals of local level or project-based energy planning

 Encouraging reductions in energy consumption and costs through energy

audits and investments in efficiency opportunities;
 Encouraging the planning, design and construction of energy efficient
neighbourhoods and buildings in urban areas;
 Assessing the scope and extent of energy use efficiency so that both energy
and money are saved;
 Exploring local renewable energy development potential;
 Improving community liveability by reducing local sources of pollution,
reducing the need for transportation through proper urban design;
 Increasing the use of cleaner energy alternatives;
 Providing information and help to users to implement local energy plans.
Benefits of Energy Planning
 GIS-supported energy plans serve as a demographic database, natural resource
database (e.g., land use, land cover, forest types, wastelands, agriculture-crop types,
production yield, irrigation details, horticulture crop types, residues, plantation area
and plantation types, social forestry programmes) and energy database.
 Energy plans can be used as forecasting tools to make projections of energy supply
and demand at intervals of 5 years and as policy analysis tools that simulate and
assess the technical economic, environmental effects of alternative energy
programmes.
 Energy plans provide comprehensive information at one place about RE potential,
supply status of commercial sources of energy (electricity, oil, kerosene, etc.),
estimation of energy demand of various sectors, techno economic and
environmental assessment of alternatives.
 Energy planning helps reduce energy expenditures of governments and taxpayers,
saves non-energy capital and operating expenditures.
 Energy planning helps increase land values in urban areas through better land use
planning.
 Good energy planning can reduce the costs of infrastructure.
 Energy planning helps in cleaning up the environment through preservation of
green spaces.
 Energy planning achieves many socio-economic objectives, such as increased
local employment and the creation of jobs through investments in energy, lower
annual energy bills, better indoor working conditions through the use of advanced
building, heating, cooling and lighting technologies.
Process of Energy Planning
 Energy planning, is a continuous, iterative process which should first assess energy
requirements consistent with sustainable human development objectives and the
lifestyle preferences of the whole population.
 These objectives and preferences should then be pursued through a supply system that
is autonomous, safe, and fair and that limits the socio-economic costs of doing so.

 A full-scale energy planning effort thus involves;

o Compiling an energy data base,
o Examining the critical relationships between supply and demand,
o Taking into account issues of sustainable resource use, environmental sustainability and
economic development,
o Stimulating local energy awareness,
o Examining existing energy goals and objectives for their effects on energy production
and use.
o Suggesting institutional mechanisms for all stages of the plan.
Activities of the energy planning process
 Data base development
 Supply and demand analysis
 Assessment of economic, social and environmental impacts
 Creation of research and development facilities
 Creation of institutional mechanisms for the participation of all stakeholders
in the planning and implementation process
 Schemes for implementation including awareness, capacity building and
educational programmes
 Setting up monitoring, follow up and evaluation mechanisms.
Database development
 Database development and management is one of the most important steps in
the process and requires careful thought, money and time.
 Effective energy database management provides the planner with information to
properly allocate budgets and resources, make forecasts (for multiple scenarios),
and manage costs and risks.
 Energy database contains physical data on energy supply, i.e., energy resources,
their productivity and accessibility, patterns of resource distribution and resource
use options.
 The existing supply options (power plants. import options etc.) must also be
enumerated. This includes data on renewable and non-renewable energy resources
(e.g., solar insolation, water resources, land use, forest cover, wastelands,
agriculture crop types, production, yield, horticulture-crop types, plant residues,
coal, oil, natural gas, etc.), their potential and availability along with seasonal and
spatial variations.
Managing energy demand and supply

Managing energy demand and supply are the key elements of the energy planning
process. Improved planning and/or management of these elements involve
identifying:

 The optimal pattern of end-use demands, ensuring that it matches the requirements
of a growing economy, including sectoral needs, incorporates demand conservation
measures and achieves improved efficiency in utilising devices; and

 The optimal energy supply system, including technically efficient extraction,

conversion and distribution of energy, and application of the most appropriate and
cost-effective production technologies.
NB:

 In view of the adverse environmental impacts of energy production and use,

environmental management has now become an integral part of the energy
planning process.

 Another aspect relevant to energy planning is the concept of industrial ecology.

Industrial ecology draws an analogy between natural ecosystems (where nothing
is wasted), and the industrial system, including the energy sectors. In this model,
energy and material residuals are no longer wastes discharged to the environment.
Instead, they become valuable resources for the economy.
 The traditional approach to energy planning involved preventing energy shortages by
increasing the supply (e.g., supply of electricity was sought to be increased by building a new
dam or fossil fuel power plant). This approach is called supply side management. It generally
involves;
 Identifying how much energy is required to eliminate an impending shortage,
 Determining the kind of energy that could best meet that demand, and
 Selecting an appropriate site.
 The era of mega hydropower projects is over in developed countries and is meeting stiff
resistance in developing countries due to appalling social misery and environmental costs that
such projects bring in their wake.
 The world is hence moving towards distributed, decentralised utilities managed by local
communities. This type of electricity generation mode is known as the captive system of
localised energy fixation.
 Systems can be owned and operated by developers, building owners, or energy service
companies as a revenue generating venture or by owner/tenant cooperatives as a community
based cost-saving initiative.
 Various options like the BO (build, own), BOO (build, own, operate), and BOOT (build, own,
operate, transfer) are available.